In 1965, President Lyndon Johnson persuaded Congress to fund a war on poverty. Since then, Congress has added to basic Social Security about 80 welfare programs, including Medicare, Medicaid, Obamacare, etc. The basic cause was the disintegration of the family structure. In 1965, 11% of births were to unmarried women. Today, it is 42% and rising.
Nationwide education standards have plummeted. Less than one in four youths qualify for the military or modern skilled careers. Sixty-three percent of employers polled pointed to a lack of skills as the primary barrier to business. As a result, more of the population needs more dollar support. Unwed mothers need food stamps and absentee fathers qualify for Medicaid. In 1965, welfare transfer payments, to include social security, were 25% of the federal budget. Today, they are 55% and, in a decade, will grow to 65%. This squeezes out money for defense and for capital improvements to our infrastructure.
Because our work force does not have the mental/educational skills for our high-tech business world, gross domestic product is projected to decrease from an historical average of 2.5% down to 1.6%. President Trump’s tariff war, once it ends, will not significantly alter these trends. Anemic productivity is not generating enough tax revenues.
So, to pay for the welfare transfers, Congress must continue to borrow more money each year. By 2035, our national debt will rise to $42–$45 trillion. Paying the interest on that debt will take more than 25% of the annual federal budget, while Congress must every year still borrow two to three trillion more dollars.
That will continue under Trump. “Medicare, Medicaid,” he said. “None of that stuff is going to be touched.” The constituencies are too vast. Eighty million people benefit from Social Security, Medicare, and veteran’s care; another 150 million enrolled in Medicaid, Obamacare, food stamps, etc. He understood he lacked the votes to curtail any of those entitlements.
Historically, when a company or a country is paying about 30% of its budget in debt interest and asks to borrow more money, disaster strikes. Holders of the debt stampede to take out their dollars before the credibility of the company or the strength of the country’s currency sinks. When that stampede begins in the United States at some point in the next decade, two political forces will collide. One group will vigorously defend the payments, accepting sky-high inflation and a future like Argentina. An opposing group will insist upon cuts to all programs. That collision is inevitable, and its resolution is unpredictable. There is no way out. Our Congress, perhaps our nation, is too riven to reach a saving compromise.
“You and I have a rendezvous with destiny,” Reagan said a half-century ago. “We’ll preserve for our children this, the last best hope of man on earth, or we’ll sentence them to take the last step into a thousand years of darkness.” We will not know until the debt disaster strikes whether the president in office has the iron will and persuasiveness of Ronald Reagan.
